Microeconomics Unit 1 Munday

What does it mean to do economics?

You must cultivate a healthy curiosity & come ready to understand the world

Why study economics?

Helps you understand the mysteries of society and the world

What is scarcity?

Limited quantities of resources to meet unlimited wants

opportunity cost

- Value of option you forgo when making decisions
- We consider the explicit & implicit costs of such actions

Sunk cost fallacy

reluctance to abandon course of action because of previous investments

intrinsic vs. extrinsic incentives

personal feelings vs. things to be gained

utility

benefits (max gain, min loss)

4 factors of production

1. land

2. labor

3. capital

4. entrepreneurship

command vs. market economy

command: determined by central institution

market: determined by private actors

invisible hand

coordinates prices & allocates scarce resources

opportunity set

illustrates range of choices availible

comparative advantage

who has the lower opportunity cost to produce a product